Fingermotion, Inc. — 10-Q Summary
Filing identity: The supplied filing names Property Management Corporation of America, not Fingermotion, Inc. Verify the company and filing match before relying on this summary.
Business context and reporting period
The unaudited quarter ended May 31, 2015, compared with the quarter ended May 31, 2014. The company provides management and consulting services for residential and commercial rental properties. It reported two management agreements; all reported revenue came from properties partly owned by company executives. The fiscal year ends February 28.
Financial results and liquidity
| Metric | Quarter ended May 31, 2015 | Prior-year quarter |
|---|---|---|
| Revenue | $3,664 | $3,587 |
| Cost of revenue | $1,608 | $1,614 |
| Gross margin | $2,056 (56.1%) | $1,973 (55.0%) |
| Operating expenses | $7,479 | $29,544 |
| Operating loss | $(5,423) | $(27,571) |
| Net loss | $(5,492) | $(27,657) |
| Cash used in operations | $(5,863) | Cash provided: $558 |
| Cash at period end | $1,167 | $3,004 |
At May 31, 2015, total assets were $1,167, current liabilities were $46,182, and stockholders’ deficit was $45,015. Reported negative working capital was $45,015. Related-party notes payable were $23,500 on the balance sheet. The filing reports no income tax provision and basic and diluted loss per share of $0.00, rounded.
Changes, outlook, and risks
- Revenue increased $77 (about 2.1%), which management attributed to higher rents at managed properties; cost of revenue declined $6. Operating expenses fell $22,065, primarily because expenses normalized after the initial public filing.
- Financing included $6,000 in new related-party loans during the quarter. The company reported only $1,167 cash and said it expected to need approximately $100,000 over the next 12 months to execute its plan, with no financing arrangements identified beyond the related-party lender. It warned that additional capital might not be available on acceptable terms.
- Management disclosed substantial doubt about the company’s ability to continue as a going concern, citing recurring losses, operating cash use, and its limited cash position. Continued operations depend on generating sufficient revenue and raising additional funds; the financial statements include no adjustments for a potential failure to continue as a going concern.
- Management planned to seek additional clients and expand into nearby Virginia counties during 2015, with statewide expansion targeted for 2016. It also said it was considering opportunities outside property management. These plans require additional capital and are not assured.
- On June 22, 2015, after quarter-end, the company sold 300,000 shares at $0.05 per share for $15,000. Shares outstanding were reported as 10,307,000 on July 14, 2015, versus 10,007,000 at May 31.
- Related-party risks are notable: the CEO-controlled Washington Capital Advisors provided demand loans bearing 1.5% interest, and the two properties generating all revenue were partly owned by the CEO and CFO. The filing reports no legal proceedings as of July 14, 2015, no defaults upon senior securities, and no off-balance-sheet arrangements during the quarter. Management said disclosure controls were effective and reported no significant quarterly change in internal controls.
Important facts to verify
- Confirm the filing belongs to the intended issuer: its cover and financial statements identify Property Management Corporation of America, not Fingermotion, Inc.
- Reconcile the related-party loan amounts: the balance sheet shows $23,500, while MD&A states $23,870 including $370 accrued interest.
- Verify the terms, availability, and current balance of the related-party financing, including the stated $50,000 total lending commitment.
- Assess whether the post-quarter $15,000 share sale and other funding sources are sufficient relative to the stated $100,000 capital need and going-concern warning.
- Consider the concentration of revenue in two executive-affiliated properties and the company’s ability to add unaffiliated clients.